Is A Cookie Business A Good Idea?

“These chocolate chip cookies are amazing… you should sell them!” If I had a dollar for every time someone told me that, I probably wouldn’t need to sell them. With everyone raving about my cookies, you might excuse me for thinking that they would make a great business. But is it true? Am I destined to follow in the footsteps of Mrs. Fields?

More Than One Cookie In The Jar

As it turns out, I’m not alone. I think a large number of cottage food operations get started when family and friends tell them that they “need to sell so-and-so”. After studying the cottage food industry for a number of years, I’ve learned that custom cakes make some of the most lucrative CFOs. I always assumed that they also represented the largest percentage of CFOs, but I was wrong. When I recently analyzed over 150 of the businesses listed on this site, I was somewhat surprised by the numbers:

From that data, we can see that about two-thirds of CFOs listed on this site sell items that fall under “sweets”, and as I recall, at least 98% of those sell cookies. It’s true that CFOs can list themselves in multiple categories, and a few fall into every category. However, about a third of those cookie businesses do not also sell cake, which tells me that a large percentage (about 20%) of CFOs have a focus on cookies. In fact, a number of CFOs have the word “cookie” in their name.

Heating Up The Oven

Here are some of the reasons I wanted to start a cookie business:

• People tell me they love them
• Store-bought cookies are terrible
• There is very little competition in the single-serving cookie space
  • There are ice cream parlors and cupcakeries, but who specializes in cookies?

However, time and time again, I have seen cookie businesses falter. Many CFOs have told me that they “don’t do cookies anymore”. A number of them have said that their business only took off when they switched to cakes. So many of these stories rolled in that I started to wonder if my chocolate chip cookie business would be so great after all.

Why Cookie Businesses Fall Flat

At one point in time, it seemed like nothing could prevent my cookies from selling. Ultimately those who have “been-there-done-that” have knocked some sense into me, and I’ve learned some of the reasons why cookies aren’t awesome:

1. They are ticking time bombs

My cookies are soft, chewy, and delicious… for about a day or two. This isn’t a problem in my household, as they usually disappear quickly, but in business, poor shelf-life is a big problem.

2. They are labor and time-intensive

I take a lot of steps to make sure my cookies come out just right. Between mixing, rolling, baking, cooling, and packaging, I can make 3 dozen cookies in an hour. I could do even better by making multiple/larger batches, but if I do, I better be sure I’m selling them all, considering point #1. That many cookies per hour might seem reasonable, until you realize…

3. They don’t have a high perceived value

Sure, the chocolate chip cookies at your local grocery store could make good air hockey pucks, but you can get 3 dozen of them for five bucks! Like it or not, customer’s perceptions aren’t drastically higher than this. Here’s a challenge: the next time you think about telling someone they should sell their delicious cookie, imagine yourself standing in a farmers market tasting a sample — would you pay $2 for one? What about $20 for a dozen? Suddenly you start to recall that you can buy a dozen donuts for under $10.

All of these factors often lead to one thing: little to no profit. The farmers market closes and you still have 4 dozen cookies unsold? You’re eating those losses in more ways than one.

Sampling The Market

Let’s say you bring 240 cookies (20 dozen) to the market and sell them all over the course of 4 hours at an average price of $20/dozen. You’ve probably spent well over a dozen hours baking, packaging, transporting, setting up, and selling, and you’re walking away with $400 of revenue. Now you have to factor in expenses, like market fees, ingredients, samples, equipment, packaging, labels, taxes, licenses, insurance, etc. And let’s not forget about the value of your time!

I hope you can see that I’m being pretty generous with that hypothetical example — sometimes I notice CFOs selling basic cookies for $5/dozen. Remember, you would need to do 50 strong markets like this to even make $20,000 of revenue. This is why many cookie CFOs are more of a break-even hobby than a business.

When Cookie Businesses Can Rise

However, it’s not all doom and gloom for cookies! Although I’m pretty confident that my chocolate chip cookies are not going to be the next big thing, I have seen many cases where cookie businesses have been successful.

Custom Decorated Cookies

Personalized and custom decorated cookies, like custom cakes, have a much higher perceived value. They do take much longer to make, but they often sell for around $3 – $5 each. More importantly, you never sell just one (set a minimum order size), and you are guaranteed to sell every one that was ordered (deposits are important!). Best of all, custom cookies can have a special wow factor that leads to automatic word-of-mouth advertising for your business.

Diet-Specific Cookies

When I was in Southern California two years ago, I saw Sugar Beak Bakery sell a 2″ cookie for $4. And then another sold, and another, and another. They were not decorated or customized in any way, but they were definitely not ordinary: organic, vegan, gluten-free cookies, filled with antioxidants and vitamins. There may not be many other places in the United States that this kind of cookie could sell for $4, but this CFO was selling to a captive audience! If you have the market for it, this kind of cookie business can work.

Large Batch Orders

Instead of selling cookies at events, sell them for events. It’s possible to turn a nice profit when you’re selling a hundred cookies at a time. As long as you can make them in close proximity to the event, shelf-life isn’t an issue. This is probably one way that my chocolate chip cookie business could be worth my time, but it would demand much more marketing and customer development efforts, compared to bringing goods to a market.

The Last Bite

Could my chocolate chip cookie business be as successful as everyone’s led me to believe? I think the “correct” answer is: I can’t know until I try. Until I analyze the market, consider my costs, determine a fair price, and start selling to learn if enough people will pay it, I cannot know that my cookies would make a good business.

When I started that process, I ran into a major hiccup when I gave people a cookie and said, “If you tried this at our farmers market and you didn’t know me, would you buy it? What would you pay?” Usually I got a response like “I don’t know… maybe a dollar?” When people switched to a buying mindset, they realized that they’d probably only buy it for $2 if it were nearly the best cookie they’d ever eaten. Suddenly my “amazing” (and formerly free) cookies weren’t so amazing after all, and that realization can be hard to swallow.

I do love making and eating cookies, and will continue to do so, but the response to my chocolate fudge was a dozen times better. I’ll be focusing on that business idea instead.